More F&O curbs likely? IIFL says market volumes beat expectations, flags short-term risks
SEBI has introduced multiple measures since October 2024 to curb speculative activity in index derivatives, which dragged volumes in Q4FY25. However, a spike in volatility lifted trading activity in the first half of FY26.
- Sep 8, 2025,
- Updated Sep 8, 2025 11:22 AM IST
Despite the market regulator SEBI’s ongoing clampdown on index derivatives, market activity showed resilience in August and early September, with volumes surprising on the upside as both traders and institutions adjusted to the new regulatory environment, IIFL Securities said in a recent note. The strength in equity derivatives, however, brings its own risks.
The uptick in retail participation, coupled with SEBI’s concerns over rising retail losses, raises the possibility of more regulatory tightening. According to IIFL, while any fresh curbs could impact near-term trading activity, they may ultimately pave the way for a more transparent and efficient market structure, supporting long-term growth.
Equity option premium average daily turnover rose 15 per cent month-on-month to Rs 64,500 crore in August, 10 per cent ahead of IIFL Secuirties' estimates. The rise was aided by a mild increase in volatility, with India VIX bouncing back after hitting a 15-month low in July.
The momentum continued into the first week of September, when premium ADTO surged further to Rs 73,700 crore, up 14 per cent MoM. According to IIFL Securities, this was likely boosted by the expiry-day adjustment between NSE and BSE as well as announcements around GST rationalisation. Lower premium ratios, at 15 bps in Q2FY26 versus 20 bps in Q1FY26, also signalled that reduced volatility may be fuelling higher trading volumes.
SEBI introduced multiple measures since October 2024 to curb speculative activity in index derivatives, which initially dragged volumes in Q4FY25. However, a spike in volatility lifted trading activity in the first half of FY26.
IIFL Securities said the recent remarks from the SEBI Chairman, suggesting a preference for longer-tenure contracts, have sparked speculation about the possible introduction of fortnightly or monthly expiries. Until regulatory clarity emerges, IIFL expects earnings visibility for exchanges and related businesses to remain clouded.
IIFL pointed out that the much-anticipated dent in BSE’s market share from its expiry-day swap with NSE did not play out. Instead, BSE managed to hold steady in the first week of September, an outcome IIFL described as a positive surprise. BSE shifted its weekly F&O expiry to Thursday from Tuesday in September, a move that was expected to cost it 2–3 per cent of market share.
BSE’s equity option premium ADTO for the first week of September stood at Rs 20,800 lakh crore, 19 per cent higher than its August average, IIFL Securities said. Its market share climbed 110 bps to 28.2 per cent, with gains across all trading days except E-2. While the initial trend is encouraging, IIFL said it would wait for more data before revising its forecasts.
Despite the market regulator SEBI’s ongoing clampdown on index derivatives, market activity showed resilience in August and early September, with volumes surprising on the upside as both traders and institutions adjusted to the new regulatory environment, IIFL Securities said in a recent note. The strength in equity derivatives, however, brings its own risks.
The uptick in retail participation, coupled with SEBI’s concerns over rising retail losses, raises the possibility of more regulatory tightening. According to IIFL, while any fresh curbs could impact near-term trading activity, they may ultimately pave the way for a more transparent and efficient market structure, supporting long-term growth.
Equity option premium average daily turnover rose 15 per cent month-on-month to Rs 64,500 crore in August, 10 per cent ahead of IIFL Secuirties' estimates. The rise was aided by a mild increase in volatility, with India VIX bouncing back after hitting a 15-month low in July.
The momentum continued into the first week of September, when premium ADTO surged further to Rs 73,700 crore, up 14 per cent MoM. According to IIFL Securities, this was likely boosted by the expiry-day adjustment between NSE and BSE as well as announcements around GST rationalisation. Lower premium ratios, at 15 bps in Q2FY26 versus 20 bps in Q1FY26, also signalled that reduced volatility may be fuelling higher trading volumes.
SEBI introduced multiple measures since October 2024 to curb speculative activity in index derivatives, which initially dragged volumes in Q4FY25. However, a spike in volatility lifted trading activity in the first half of FY26.
IIFL Securities said the recent remarks from the SEBI Chairman, suggesting a preference for longer-tenure contracts, have sparked speculation about the possible introduction of fortnightly or monthly expiries. Until regulatory clarity emerges, IIFL expects earnings visibility for exchanges and related businesses to remain clouded.
IIFL pointed out that the much-anticipated dent in BSE’s market share from its expiry-day swap with NSE did not play out. Instead, BSE managed to hold steady in the first week of September, an outcome IIFL described as a positive surprise. BSE shifted its weekly F&O expiry to Thursday from Tuesday in September, a move that was expected to cost it 2–3 per cent of market share.
BSE’s equity option premium ADTO for the first week of September stood at Rs 20,800 lakh crore, 19 per cent higher than its August average, IIFL Securities said. Its market share climbed 110 bps to 28.2 per cent, with gains across all trading days except E-2. While the initial trend is encouraging, IIFL said it would wait for more data before revising its forecasts.